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Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act

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Appearance before the Standing Senate Committee on Banking, Trade and Commerce

December 13, 2006
Ottawa, Ontario

Opening Statement by Jennifer Stoddart
Privacy Commissioner of Canada

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We are pleased to have the opportunity to appear before this Committee to comment on Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act.

I would like to begin by congratulating the Committee on its report, Stemming the Flow of Illicit Money: A Priority for Canada. The Report reflects the concerns we have about the potential impact on our privacy rights resulting from an increase in the amount of personal information collected and disclosed by FINTRAC. As the Report appropriately concludes, “the detection and deterrence of money laundering and terrorist activity financing are critically important public policy objectives, but so too is the protection of privacy and personal information.”

The changes being proposed in Bill C-25 are incremental, but nonetheless significant. The number of organizations required to monitor and to collect information about their clients and customers will increase. The amount of personal information being collected will expand. More transactions will be subject to scrutiny and reporting. FINTRAC will be able to share more information with more agencies and organizations.

It is very difficult for us to assess the seriousness of the problems that the legislation is intended to address and whether the changes being proposed are necessary. The witnesses who have appeared before this Committee and the House of Commons Committee have had difficulty estimating the scope of the problem. They have not presented any compelling evidence to suggest that the incidence or the quantum of money laundering or terrorist financing is increasing or that the existing provisions are inadequate. Rather, we are being told that the Act has to be updated to meet international commitments.

We understand that money laundering both rewards and supports criminal activities, and we are certainly aware that the financing of terrorist groups threatens our security and the security of the rest of the world, but we are not convinced that the case has been made to further expand Canada’s anti-money laundering regime at this time.

There are three specific provisions in the Bill that I would like to raise. The first concerns a new provision that would allow FINTRAC to share information with the Communications Security Establishment (CSE) if it determines the information is relevant to the mandate of CSE to acquire and use information for the purpose of providing foreign intelligence.

CSE is not an investigation or enforcement agency and any information shared with CSE cannot be used for enforcement purposes, unlike the information FINTRAC can share with the RCMP, the Canada Revenue Agency or the Canada Border Services Agency. CSE can, however, use this information to subject individuals to increased surveillance—over and above the surveillance inherent in the anti-money laundering regime—and any intelligence information obtained by CSE could then be disclosed to the RCMP, CSIS and even foreign agencies and potentially fed back to FINTRAC via the RCMP’s ability to voluntarily provide information to FINTRAC. We question the need for this provision. If the RCMP or CSIS wants to provide information to CSE with respect to possible surveillance targets it should do so directly.

The Bill also proposes to require covered entities to take special measures with respect to foreign “politically exposed persons” and their families. The notion that individuals and their families will be subject to additional scrutiny simply because of their position is troubling. Our understanding is that this provision has been introduced to address Financial Action Task Force (FATF) recommendations. Assuming other countries adopt similar measures, Canadian officials conducting certain transactions in other countries will be subject to additional scrutiny. Given the number of information sharing agreements that FINTRAC has with similar bodies in other countries we are concerned this provision could be used as a back door way for countries to obtain information about their own officials.

I was pleased that this Committee recommended increased oversight over FINTRAC. As amended by the House, Bill C-25 now requires my Office to conduct a review every two years of measures taken by FINTRAC to protect information it receives or collects under this Act and submit a report to Parliament.

I should mention that we were planning to conduct an audit of FINTRAC in 2007-08 in any event pursuant to our authority under the Privacy Act. While we welcome the requirement for mandatory review of FINTRAC’s measures to protect personal information, we question the feasibility of doing so every two years. Unfortunately, we were not consulted on this amendment, and given the impact on resources and other equally compelling priorities, I would ask this Committee to revisit the frequency of the mandatory review.

We hope that the Committee will consider carefully the necessity and the proportionality of this legislation as it moves to the clause-by-clause review keeping in mind the object in section 3 of the Act to ensure “that appropriate safeguards are put in place to protect the privacy of persons with respect to personal information about themselves.”